Is renting to students in college towns over?

Question

Im considering investing in my old college town, Radford, VA, and was wondering what everyone's thoughts were on student housing overall? with students gone from most colleges for over a year thanks to COVID and the rising cost of college tuition, is renting to students in college towns not a smart financial vehicle of the future?

Andrew Syrios · Answer

We're still renting to College students around the University of Oregon. No problems there at least. I think things will return to a "new normal." Colleges will take a hit in general and there will be more working/being a student from home type stuff (i.e. Zoom), but if the Covid crisis showed anything, it showed that people go insane when alone even with Zoom. We need interaction with other people face-to-face. As the crisis continues to abate, colleges will shrink a bit as will the use of classroom, but not dramatically IMO.

JD Martin · Answer

We had more demand from students, not less, with the pandemic. More parents were keen on their students being in a self-contained single family home rather than living in dorms. We probably saw double the amount of student applications on our vacancies over the past year. The students we do have never went away, either. They did their work remotely from the rental and were still able to access campus when necessary.

Room and board at our local state university for this academic year is almost $10k. We have a couple of rentals with 2 or 3 college students paying $1000-1200 per month, and if you divide that out by two or three it works out as cheap or cheaper than on-campus housing.

Gaetano Ciambriello · Answer

A couple thoughts on student housing. Each market will be different.

In my market (private school, mom + dad pay rent, high cost of living), students were remote, but still lived at off campus housing. COVID did not stop students from renting. A lot of colleges have old dorms that fit two students in a room with shared (communal) bathrooms or a suite with multiple students living in one suite and one shared bathroom. I think college students will start to become more picky and will want more space, nicer amenities and nicer housing (especially if mom and dad are paying for it).

If you are an operator that provides a superior service and product, I think you will be fine. Buying where the students want to be is important. That can be close to school, close to downtown or close to bars, etc.

I believe schools are seeing record enrollments for the fall of 2021. Students who took gap years are returning. Across the U.S., housing is under-supplied. There is a need for housing for faculty, parents and other individuals in most markets near college town.

I am excited for student housing moving forward. I hope these scattered thoughts helped provide insight.

Alecia Loveless · Answer

@John Osborne I think around most campuses if you’re in the correct markets students will return. I’d make sure your housing is in the right location, ie. not too far away from campus, and not too expensive, and I think you’ll be fine. While I think some campuses have a market for luxury student housing I believe quality housing at around the going rate is going to be the best bet right now.

I have a family member trying to buy some campus housing in Texas and her market is too hot to handle still. Existing landlords are not selling and there’s absolutely no multis to be found anywhere in this two university town that has about 60,000 college students.

Stick to your own goals and guidelines you’ve set for yourself and don’t let FOMO get the best of you and you’ll still find things to buy.

Carl C. · Answer

Far from being done, we are seeing the strongest demand in the 8 years we have owned college housing. Schools are either back in session or planning to be back and students don't want to live in dorms right now. At some point this will balance out and apartments or dorms will come back into favor but for the time being, college houses are hot here.

Daniel Johnson · Answer

@John Osborne City area.

Jeremy Hart · Answer

For immediate, blow-your-socks-off cash flow, @John Osborne, yes, off-market would be your way to go, although we’ve been finding that the upside for sellers is too great, and they’re going on market anyhow.

Truthfully the slow and steady approach works so well here in these tertiary markets that when lined up with the low-cost of borrowing, you can still get good per door numbers for some of these on-market deals when you can win them. I’ve countless examples of these over the last 18 months. A property might cost an additional $premium/mo because of the market, but that’s then offset by renting to a graduate/professional who’s not as price-sensitive as an undergrad.

John Osborne · Answer

@Jeremy Hart

Thanks Jeremy. How hot is the market in Blacksburg/radford at the moment ? Quick looks on realtor or Zillow only show a few houses and they seem very pricey compared to tentative rents. Is it truly a place where off market properties only work?

John Osborne · Answer

@Daniel Johnson

Thanks. Is your college campus in a city or rural area?

Jeremy Hart · Answer

@John Osborne I'd second what everyone above has said. I don't manage others' portfolios, but what I'm seeing with my own rentals, as well as on the sales side, is that the demand has remained. Nearly every parent I've spoken to expects full in-person in both Blacksburg and Radford in 2022/2023 - I've talked to only one that will not be going back full-time in 2021/2022. That said, while the trend among the large developments is the all-inclusive approach, there are plenty that aren't interested in paying upwards of $1,000/bedroom or the pool/golf simulator/shiny complex lifestyle.

One class of renter that's really getting squeezed is the graduate/professional - there's lots of undergraduate housing, but in Radford in particular there's not a great deal of quality properties for folks like the graduate/professional. I think there's a real opportunity there.

Is renting to students in college towns over?

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